In early February, debt buyer Encore Capital Group (Nasdaq: ECPG) announced that its 2011 profit rose to $61 million – an increase of almost 25% over 2011. A few days later, The Shareholders Foundation issued a press release announcing that some members of Encore Capital Group’s board were being investigated by a law firm on behalf of Encore’s shareholders. The release said that the investigation revolves around potential breaches of fiduciary duties, namely allegations that the debt buyer engaged in business practices that violated the Fair Debt Collection Practices Act and state statutes. The release goes on to cite a number of actions taken against Encore Capital Group and its subsidiaries, Midland Credit Management and Midland Funding. Those include various class action lawsuits, an action by the Texas Attorney General, and the North Carolina Department of Justice.
NCO Debt Collection Agency Settles with 19 State Attorneys General
According to a press release issued by NCO Financial Systems, the debt collection agency has arrived at a settlement with 19 state Attorneys General, agreeing to pay a total of $575,000, as well as to set up a $50,000 consumer restitution fund in each state. The states affected are Alaska, Arkansas, Idaho, Illinois, Iowa, Kentucky, Louisiana, Michigan, Nebraska, Nevada, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Rhode Island, South Carolina, Vermont, and Wisconsin.
According to Idaho Attorney General Lawrence Wasden, consumers who are eligible to receive restitution either:
* Paid NCO for a debt they did not owe;
* Overpaid interest on a debt that was not supported by the underlying agreement between the consumer and the original debt holder or that was otherwise permitted by law; or
* Paid more on a debt than the amount NCO agreed to settle the account.
The restitution funds are available through February 6, 2015. If you think you are impacted by the settlement, you should visit your state Attorney General’s website.
According to Vermont Attorney General William Sorrel’s press release, NCO’s settlement included provisions that the company must:
* comply with applicable state and federal law;
* for debts reported to credit reporting agencies, notify the agencies within 30 calendar days of any consumer dispute;
* provide notice to consumers about their debt collection rights under federal and state law; monitor compliance, including through training employees and independent contractors and creating policies and procedures for handling customer complaints; and
* submit compliance reports to involved states every 6 months for 18 months.
Several news reports have noted that NCO must, within 30 days, notify credit reporting agencies of verbal disputes (as opposed to only written disputes) from consumers.
Asset Acceptance Settles with FTC for $2.5 Million
Asset Acceptance has been a notorious debt buyer, with a track record of going after consumers for debts that have passed the statute of limitations. Now, the Federal Trade Commission has announced that Asset Acceptance has agreed to pay a $2.5 million civil penalty for their bad behavior.
The FTC alleged that Asset Acceptance had violated the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and that FTC Act. According to the press release issued by the FTC, the regulatory agency’s complaint charged the debt buyer with:
* Misrepresenting that consumers owed a debt when it could not substantiate its representations;
* Failing to disclose that debts are too old to be legally enforceable or that a partial payment would extend the time a debt could be legally enforceable;
* Providing information to credit reporting agencies, while knowing or having reasonable cause to believe that the information was inaccurate;
* Failing to notify consumers in writing that it provided negative information to a credit reporting agency;
* Failing to conduct a reasonable investigation when it received a notice of dispute from a credit reporting agency;
* Repeatedly calling third parties who do not owe a debt;
* Informing third parties about a debt;
* Using illegal debt-collection practices, including misrepresenting the character, amount, or legal status of a debt; providing inaccurate information to credit reporting agencies; and making false representations to collect a debt; and
* Failing to provide verification of the debt and continuing to attempt to collect a debt when it is disputed by the consumer.
As part of the settlement, Asset Acceptance agreed to a number of other conditions. According to the FTC press release:
The proposed settlement order resolving the agency’s charges also requires that when consumers dispute the accuracy of a debt, Asset Acceptance must investigate the dispute, ensuring that it has a reasonable basis for its claims the consumer owes the debt, before continuing its collection efforts. The proposed order also bars the company from placing debt on consumers’ credit reports without notifying them about the negative report.
West Virginia AG Settles with Capital One
West Virginia Attorney General Darrell McGraw announced a settlement in the state’s case against Capital One and its sister companies. The case related to the lender’s credit card practices prior to January 1, 2006. Although the settlement means that Capital One does not have to admit to any wrongdoing, the financial institution is ponying up $13.5 million. According to a press release issued from McGraw’s office, “Capital One agrees to provide $3 million in debt forgiveness to West Virginia consumers, $9.5 million to the State of West Virginia to be used for financial relief for West Virginia consumers, and $1 million to the Attorney General’s office for consumer education and restitution.”
Commercial Recovery Systems: How Low Can You Go?
A Texas woman says she has suffered immeasurably at the hands of Commercial Recovery Systems, a third-party debt collection agency. In Flynn v. Commercial Recovery Systems (U.S. District Court, Northern District of Texas, Dallas Division), it is alleged that the debt collection agency went beyond the pale in attempting to collect a debt. The complaint alleges that the debt collector called Flynn’s cell phone up to six times a day, and called her octogenarian parents at 7:00 a.m. and told them that there was a warrant for Flynn’s arrest. Moreover, the debt collector allegedly threatened to come to Flynn’s house, and to arrive with a law enforcement agent. Added to the mix are allegations that Commercial Recovery Systems allegedly failed to send Flynn the mandated 5-day notification letter, nor informed her of her right to dispute the debt. The suit, filed by Lemberg & Associates on behalf of Ms. Flynn, cites numerous violations of the federal Fair Debt Collection Practices Act, as well as the Texas Debt Collection Act.
Debt Collectors Top WhitePages’ List of “Call Spammers”
This year, the debt collection industry has clamored to amend the Telephone Consumer Protection Act and the Fair Debt Collection Practices Act to allow them greater leeway in calling consumers’ cell phones. According to a recent press release issued by WhitePages, some debt collectors outshine the competition in pestering consumers with unwanted calls. WhitePages named the most aggressive “Call Spammers” of 2011, defining call spamming as unwanted calls or texts to mobile phones, and debt collection agencies nabbed six out of the top ten spots. Allied Interstate topped the list, followed by CBE Group, CMI Group, ER Solutions/Convergent, Portfolio Recovery Associates, Satlander.
American Profit Recovery Owner on FOX Boston
Jeff DiMatteo, owner of American Profit Recovery debt collection agency, recently appeared on Boston’s FOX 25 Morning News to discuss what consumers should do when they’re contacted by debt collection agencies. While some of the information is valuable (don’t ignore debt collector communication), other information was incomplete. Yes, it’s important to validate a debt, but what about a consumer’s right to dispute the debt? Yes, debt collectors can’t call before 8:00 a.m. or after 9:00 p.m., but what should a person do if the debt collector is abusive? DiMatteo urged consumers to visit AskDrDebt.com, a website produced by the debt collection industry. Definitely only one side of the story.
Minnesota Department of Commerce Tackles Debt Collection Business Practices
Minnesota Department of Commerce Commissioner Mike Rothman announced that seven debt collection agencies signed consent orders and agreed to pay fines after being investigated by the state agency for business practices that violated state law. Charges were brought against an eighth debt collection agency, but that agency is fighting the charges.
The consent orders read like a Who’s Who of the debt collection industry. Here are excerpts of the charges, as enumerated in the Commissioner’s press release:
Allied Interstate: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing debt collectors with prior felony convictions; and 4) failing to report when its registered debt collectors were fired for failing background checks, swearing at debtors, theft of debtor’s financial information, or falsifying debtor records.
Bureau of Collection Recovery: 1) directing employees to change the dates of scheduled payments; 2) changing the dates of deposit for postdated payments; 3) failing to establish adequate screening procedures when hiring collector applicants; 4) failing to properly screen numerous debt collector registrations before submitting license renewal requests to the Commissioner; 5) employing collectors with felony criminal backgrounds; and 6).failing to notify the Commissioner of employee terminations for using profanity, third party disclosure violations, and harassing debtors.
AllianceOne: 1) failing to establish adequate screening procedures when hiring individual collector applicants; and 2) employing debt collectors with prior felony convictions.
Van Ru Credit Corporation: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing three collectors with felony criminal backgrounds; and 4) failing to notify the Commissioner of at least 15 employee terminations for verbally abusing debtors, using profanity, and third party disclosure violations.
IC System: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing collectors with felony criminal backgrounds; 4) failing to notify the Commissioner of at least 10 employee terminations for using profanity, third party disclosure violations, and repeatedly calling debtors at their places of employment; and 5) allowing at least 23 debt collectors to work at locations that were not licensed.
General Revenue Corporation: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen numerous debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing a collector with a felony criminal background; and 4) failing to notify the Commissioner of at least 40 employee terminations for using profanity, third party disclosure violations, and threatening an alleged debtor on MySpace.
Nationwide Recovery Systems: Commingling trust account funds collected for creditors with the agency’s operating fund, thereby engaging in an act or practice that demonstrated the firm was untrustworthy, financially irresponsible, or otherwise incompetent.
Commercial Recovery Corporation: 1) failing to pay vendors, including CP Office Products (Circle Pines, MN); 2) failing to collect thousands of dollars from alleged debtors and failing to remit those payments to clients, including Brown & Bigelow (St. Paul, MN) and ADvantage Tape (Edina, MN); 3) holding a negative balance on one or more of its trust accounts; 4) providing false information to the Commissioner; 5) failing to pay rent in the amount of $99,700; 6) failing to retrieve sensitive records from the company’s landlord following eviction; and 7) defaulting on a Promissory Note due to CRC’s bank in the amount of $278,809. Commercial Recovery did not sign a consent order.
Appeals Court Rules Against Arrow Financial Services
The U.S. Court of Appeals for the Ninth Circuit ruled against Arrow Financial Services in the class action suit Gonzales v. Arrow Financial Services. The debt buyer purchased time-barred debts owed to health clubs, and then the debt collection agency sent 40,000 California consumers letters in an attempt to collect those debts. Because the debts were more than seven years old, the Fair Credit Reporting Act says that Arrow Financial Services could not report the debts to credit bureaus like TransUnion, Experian, and Equifax. Yet in the collection letters sent to consumers, Arrow Financial Services included the sentence, “Upon receipt of the settlement amount and clearance of funds, and if we are reporting the account, the appropriate credit bureaus will be notified that this account has been settled.” On the reverse side of the letter, it said, in part, “As required by law, you are hereby notified that a negative credit report reflecting on your credit records may be submitted to a credit reporting agency if you fail to fulfill the terms of your credit obligations.”
Gonzales sued Arrow Financial Services for violating the Fair Debt Collection Practices Act, and in 2007, a district court found in his favor. In a subsequent jury trial, the jury awarded Gonzales and other class members a combined total of $225,500. In its appeal, Arrow Financial Services argued that, because the letter contained the word “if” (“if we are reporting the account”), the consumer could not interpret the letter as saying the debt buyer would or could report the account. The appellate court disagreed, saying, “At the outset, we emphasize that a literally true statement can still be misleading.”
U.S. District Court Grants Class Certification in Debt Collection Case Against Portfolio Recovery
We reached a milestone in Zimmerman v. Portfolio Recovery Associates, namely that the U.S. District Court granted our motions for summary judgment and class certification. We issued the following press release yesterday:
SEPTEMBER 20, 2011 - STAMFORD, CT - The U.S. District Court for the Southern District of New York has granted the plaintiff’s motions for summary judgment and class certification in Zimmerman v. Portfolio Recovery Associates, LLC. According to Jason Zimmerman’s attorney, Sergei Lemberg, “We are pleased that the Court ruled in our favor, granting summary judgment in favor of 990 consumers victimized by Portfolio Recovery Associates.”
The facts of the case revolve around a debt collection “Pre-Suit Package” that was sent under Portfolio Recovery Associates “Litigation Department” letterhead and included a cover letter, as well as documents that appeared to be a “lawsuit,” including a “Summons” and a “Complaint” that referenced the District Court of the County of Nassau, First District, and listed Zimmerman as the defendant. The cover letter said, in part, “Enclosed please find a copy of the lawsuit our local counsel in your state intends to file against you related to the delinquent account referenced above.” However, a closer examination of the papers revealed that the Pre-Suit Package did not contain actual legal papers, but rather were simulated legal papers made to look real.
The Court found that Portfolio Recovery Associates violated provisions of the Fair Debt Collection Practices Act (FDCPA) relating to “[t]he use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court…of the United States…, or which creates a false impression as to its source, authorization, or approval,” or which constitutes “[t]he false representation or implication that documents are legal process. ” The Court’s opinion stated, “The ‘least sophisticated consumer’ might well conclude that Defendant had initiated a lawsuit to collect the debt, given the form of the Summons and Complaint, the reference to the court and parties…and the fact that an attorney from Portfolio’s “Litigation Department” had signed the cover letter.
Lemberg said, “The law unequivocally prohibits debt collection agencies from sending official-looking documents that lead consumers to believe that they are being sued; it is quite surprising that the practice persists.” Noting that it would be cumbersome for the 990 consumers affected by Portfolio Recovery Associates’ “Pre-Suit Package” to individually pursue actions against the debt collector, Lemberg applauded the Court’s decision to grant class certification. “We look forward to obtaining money for all of the consumers who were impacted by PRA’s actions.”
This release references Zimmerman v. Portfolio Recovery Associates, LLC (U.S. District Court, Southern District of New York, 1:09-cv-04602-PGG).
Sergei Lemberg
